Broadcom reported an 85% year-over-year revenue increase to $29.59 billion for its fiscal third quarter, surpassing analyst expectations. Adjusted earnings per share rose 96% to $3.32, exceeding the forecast of $3.24. Despite these strong results, Broadcom's stock fell slightly in after-hours trading, reflecting ongoing investor disappointment as shares have only risen about 6% this year.
CEO Hock Tan provided a bullish outlook for AI revenues, projecting $58 billion for fiscal year 2026, an increase from a previous estimate of $56 billion. For fiscal year 2027, he raised the revenue forecast to $115 billion, although this was below some market expectations.
The highlight was Tan's prediction that AI revenue could double to $230 billion by fiscal year 2028, significantly above the FactSet consensus of $177 billion. This long-term outlook is supported by Broadcom's partnerships with major tech firms like Google, Anthropic, OpenAI, and Meta Platforms, which are expected to drive demand for its specialized chips.
However, concerns about supply constraints and customer concentration have led to a cautious market response. Broadcom's semiconductor solutions segment saw a 70% revenue increase, with AI semiconductor revenue surging 221% year-over-year.
Despite a forecasted revenue of $34.8 billion for the current quarter falling short of expectations, the company anticipates significant growth in AI semiconductor revenue.
Overall, while Broadcom's earnings estimates are likely to rise, the market's reluctance to assign a higher valuation multiple has prompted analysts to adjust price targets downward, reflecting a more cautious outlook amidst potential challenges